New and Improved: Economics' Contribution to Business History

The relationship between economics and history has always been uneasy not least since the marginalist revolution of the 1870s laid down the foundations for contemporary mainstream economics. The tension between the two disciplines is not difficult to understand. Quite apart from differences in style and research methods which divide all disciplines, the dull concern of the dismal science with patterns of supply and demand seem too far removed from historical themes and how societies evolve and change over extended periods. Nor do standard assumptions within economics endear it to historians, with resources, technology and preferences taken as exogenous. An uncomfortable accommodation between the disciplines had been reached with the emergence of the new economic history. The success of cliometrics has been significant but limited by its failure to remove beyond what are generally perceived to be severe limitations of neoclassical economics, especially in studying historical themes. Over the past two decades, however, economic theory has itself begun to address some of these deficiencies, albeit on its own terms. By stressing market imperfections, especially those derived from informational imperfections by way of theoretical novelty, mainstream economics has purported not only to eschew dependence on models of perfect competition, but also to be able to broach non-market and non-economic factors such as institutions and collective and customary behaviour. Not surprisingly, this has led to a renewed assault upon history by economics and its representatives within economic history.